US caustic producer announces $80/dst increase on tight supply

HOUSTON (ICIS)--A major US caustic soda producer announced an $80/dry short ton (dst) price increase for domestic caustic soda, market sources said on Tuesday.

In a letter sent to customers, the producer said the increase was based on current market conditions, including the continued decline of chlorine demand and its low caustic soda inventory.

The tightened supply conditions were not expected to improve until late 2012, according to the letter.

One major buyer said the $80/dst increase was “unfounded and will not be fully implemented”.

While caustic soda inventories are low, domestic producers have said that January orders for the co-product derivative polyvinyl chloride (PVC) industry are “robust and will support higher operating rates,” the buyer added.

The buyer called the increase an effort by the producer to “gain the last opportunistic margin they can” before the end of the year.

The buyer said the marketplace may be trying to cover positions in the event that Tosoh declares a force majeure, but described its impact as “a drop in the bucket” in comparison with other players’ expectations.

Another major US producer said the $80/dst price hike announcement wasn’t unexpected, given the longstanding tightness of the market. That producer would not comment on the possibility of making a similar increase.

A third US producer said it is considering its position in the wake of the announcement.

US October contract prices are at $470–540/dmt FOB (free on board), as assessed by ICIS. Market consensus has not yet been reached on November contract prices.